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By Hasmik Mkrtchyan

YEREVAN (Reuters) - Armenia's Prime Minister Hovik Abrahamyan is expected to resign on Thursday, a source close to the government said, after an economic slowdown this year and outbreaks of violence prompted the president to call for a new government.

The source told Reuters the ruling Republican Party would discuss Abrahamyan's possible resignation on Thursday. "There are all indications that this decision will be announced tomorrow," the source said.

A spokesman for President Serzh Sarksyan, who proposed in August a "government of national accord", declined to comment. Local media said that the decision was likely to be announced on Thursday at the Republican Party's executive council session.

Abrahamyan was appointed prime minister two years ago. In 2015 Armenia's economy started to deteriorate - economic growth slowed to 3 percent in 2015 from 3.5 percent in 2014 and below the government's growth forecast of 4.1 percent. The government expects 2.2 percent economic growth in 2016.

Armenia, a country of 3.2 million people, depends heavily on aid and investment from former Soviet overlord Russia, whose economic downturn has hit Armenian exports and much-needed remittances from Armenians working there.

The government has also faced political challenges, including a flare-up of violence in Azerbaijan's breakaway Nagorno-Karabakh region in April between Armenian-backed separatists and Azeri forces.

Two months later a group of 30 armed men seized the police station and took hostages in the Armenian capital Yerevan. Two police officers were killed during a two-week stand-off, before gunmen surrendered to the authorities.

The incident led to mass protests in the capital, when people took to the streets to secure the release of a jailed opposition politician and resignation of the government and the president.

Shortly after that Sarksyan said that radical reforms in political and social life were needed. He said it was necessary to form "a government of national accord" to provide a broader distribution and division of political responsibility.

Local media reported on Wednesday that Abrahamyan might be replaced by the 53-year-old technocrat Karen Karapetyan, a former head of the national gas distributing company ArmRosGazprom and later Yerevan mayor.

After leaving the post of mayor, he moved to Moscow, to be appointed as the first vice-president of Gazprombank. He currently serves as the Russian gas distribution company Gazprom mezhregiongaz's deputy CEO.

Experts say the new government is likely to be temporary and the final configuration will emerge only after the parliamentary election of 2017 and the end of Sarksyan's second term in 2018, when the full transition from the semi-presidential form of government to a parliamentary republic will be completed.